How it works

The tax-free cash sum payable at each stage is a proportion of your overall entitlement. In the early years, the tax-free cash sum makes up a large proportion of your overall income.

Naturally, as the first encashments are normally small in relation to your total pension fund, the income produced from the annuities, or USP investments, in the early years is likely to be low. Bear in mind though, that any annuity or USP income you do buy will continue to build up each time you make encashments. So, as time goes on, the income from annuities or USP starts to form your main income.